Gold prices are on the way up as stocks across the world are on the way down following Russia's economic and military responses to Western sanctions.
However, the trend will only be temporary if the situation in Ukraine does not escalate to all-out war, according to market watchers.
Global stock prices fell further yesterday over increasing concern about the situation in Ukraine following Russia’s decision to ban all imports of food from the United States and all fruit and vegetables from Europe.
Meanwhile, the possibility of President Putin deploying military forces in Ukraine has also risen following Moscow’s decision to amass around 20,000 troops on its neighbour’s borders, according to Nato.
As to the world’s major stock indexes, Germany’s Deutscher Aktien Index dropped 0.65 per cent to 9,130.04 points early yesterday, London’s FTSE 100 Index fell 0.69 per cent to 6,636.61, and the Dow Jones Industrial Average was down to 16,340 on Wednesday, before bouncing back up to 16,443.34.
In Asia, Japan’s Nikkei 225 Index lost 0.45 per cent to 15,091.44 points yesterday, Hong Kong’s Hang Seng Index dropped 0.51 per cent to 24,458.06, the Korea Composite Stock Price Index shed 0.46 per cent to 2,051.24, China’s Shanghai Stock Exchange Composite Index lost 0.56 per cent to 2,205.01, Singapore’s Straits Times Index gave up 0.35 per cent to 3,308.65, Malaysia’s Kuala Lumpur Composite Index lost 0.1 per cent to close at 1868.10, and the Jakarta Stock Exchange Composite Index dropped 0.21 per cent to 5,047.43.
The Stock Exchange of Thailand Index, meanwhile, lost 0.14 per cent to close at 1,522.27 points yesterday.
Usara Wilaipich, a senior economist at Standard Chartered Bank (Thai), said the decline in stock indexes across Asia was most likely a psychological effect after investors woke up yesterday to see a negative response from Europe and US capital markets towards Putin’s response to the West.
However, the effect is expected to be temporary, she said.
"The fall in Asian stock indexes was caused by temporary psychological effects toward developed markets’ negative response to the Ukraine situation and, if the situation does not develop into all-out war, I believe the effects on Thailand’s capital market will be minimal," she added.
Jitti Tangsithpakdi, chairman of the Gold Traders’ Association, said the rising geopolitical risks in Ukraine would have a direct effect on the global price of gold because investors would seek safe-haven commodities in order to spread their investment risk from global uncertainties. This will eventually lead to an increase in demand for gold, and to higher prices.
"The gold price in the second half of the year will fluctuate on the positive side from the increase in global geopolitical risks, which still have no end in sight, and the Gold Traders’ Association believes that the global gold price will be in the range of US$1,280-$1,340 [Bt41,307-Bt43,248 per ounce] from now until the end of the year," he said.
Meanwhile, a survey by the Gold Research Centre has shown gold investors and traders believe global price of the precious metal this month will be in the range of $1,240-$1,340 per ounce, while price in Thailand is expected to be in the range of Bt19,100-Bt20,500 per one baht weight.